Privilege as Economic Irrationality

Download: “Intellectual Property”: A Libertarian Critique

I. The Ethics of “Intellectual Property”
II. Privilege as Economic Irrationality
III. “Intellectual Property” and the Structure of the American Domestic Economy
IV. “Intellectual Property” and the Global Economy
V. “Intellectual Property,” Business Models and Product Design
VI. Is “Intellectual Property” a Necessary Incentive?

Artificial property rights create irrationality by holding productive resources out of use and creating maldistribution of purchasing power.

In the 1830s Thomas Hodgskin, writing in The Natural and Artificial Right of Property Contrasted, noted the effect of artificial property rights in land in holding productive land out of use and denying opportunities to labor. When land is made artificially scarce to labor by political appropriation of land, so that land owners are able to hold vacant and unimproved land out of use, the landlord will not allow it to come into use unless is is productive enough to support not only the laborer himself but also the rentier. Projects like the draining of marshes and cultivation of waste land, if homesteading were free, would have amply repaid the laborer for his own labor, were not undertaken because labor sufficient to support the laborer and his family in comfort could not “obtain from them a sufficiency to pay profit, tithes, rent, and taxes.” [33]

“Intellectual property,” likewise, enables the owner to hold productive techniques out of use unless the would-be user is able to use them productively enough to provide an acceptable return to the patent or copyright holder, in addition to himself.

And as we shall see below, “intellectual property” is responsible for a phenomenon Tom Peters celebrated: the growing portion of the price of goods comprised of “intellect” and “ephemera.” This is part of a larger phenomenon, by which artificial scarcities, rents on artificial property rights, and the inflated overhead costs imposed those things and by other licensing and regulatory schemes, together erect barriers between effort and subsistence.

By simultaneously increasing the threshold of labor required for comfortable subsistence, and enabling the owners of artificial property rights to derive unearned rentier incomes unrelated to any legitimate effort, “intellectual property” divorces effort from consumption and creates a maldistribution of purchasing power. Regardless of one’s views of the operation of Say’s Law in a free market, it is clear that maldistribution of purchasing power is a very real problem under state capitalism. Hodgskin anticipated this phenomenon almost a century before J.A. Hobson or Keynes.

The wants of individuals which labour is intended to gratify, are the natural guide to their exertions. The instant they are compelled to labour for others, this guide forsakes them, and their exertions are dictated by the greed and avarice, and false hopes of their masters. The wants springing from our organization, and accompanying the power to labour, being created by the same hand which creates and fashions the whole universe, including the course of the seasons, and what the earth brings forth, it is fair to suppose that they would at all times guide the exertions of the labourer, so as fully to ensure a supply of necessaries and conveniences, and nothing more. They have, as it were, a prototype in nature, agreeing with other phenomena, but the avarice and greed of masters have no such prototype…. By this system the hand is dissevered from the mouth, and labour is put in motion to gratify vanity and ambition, not the natural wants of animal existence. When we look at the commercial history of our country, and see the false hopes of our merchants and manufacturers leading to periodical commercial convulsions, we are compelled to conclude, that they have not the same source as the regular and harmonious external world. [34]


33. Hodgskin, “Letter the Eighth: Evils of the Artificial Right of Property,” The Natural and Artificial Right of Property Contrasted. A Series of Letters, addressed without permission to H. Brougham, Esq. M.P. F.R.S. (London: B. Steil, 1832).

34. Hodgskin, The Natural and Artificial Right of Property Contrasted. A Series of Letters, addressed without permission to H. Brougham, Esq. M.P. F.R.S. (London: B. Steil, 1832). Online Library of Liberty

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